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Dynamic analysis of multi-echelon supply systems

1978; Elsevier BV; Volume: 2; Issue: 4 Linguagem: Inglês

10.1016/0360-8352(78)90010-4

1879-0550

Jerome Burns, B. D. Sivazlian,

Sustainable Supply Chain Management

This paper investigates the dynamic response of a multi-echelon supply chain to various demands placed upon the system by a final consumer. When each supply point in the chain uses a typical linear decision rule for placing orders, it is shown that the system amplifies minor variations in consumer demand into major disturbances at higher echelons. This amplification is traced to two sources, one being a legitimate and unavoidable inventory adjustment and the other being an unwarranted 'false order' effect. A new decision rule is derived which automatically suppresses these false orders. The two decision rules are compared in a three-echelon simulation model, and the revised rule experienced fewer stockouts, maintained lower average inventory, and greatly reduced the amplification effect.